The International Monetary Fund (IMF) has revised Saudi Arabia’s 2024 Gross Domestic Product (GDP) forecast down to 1.5%. This adjustment follows a previous cut in July, where the IMF lowered the estimate from 1.7%. The reduction stems from extended oil production cuts and ongoing regional conflicts, including the unrest in Sudan. Despite this, the IMF anticipates stronger growth in 2025, projecting a rise to 4.6%.
Impact of Oil Production on GDP
As the world’s largest oil exporter, Saudi Arabia remains dependent on oil revenues. The IMF’s revision is largely due to the Kingdom’s decision to extend oil production cuts, aimed at stabilizing the global oil market. Oil prices are expected to rise by 0.9% in 2024, reaching around $81 per barrel. However, previous IMF estimates suggested Saudi Arabia requires oil prices closer to $100 per barrel to balance its budget.
Broader Regional Economic Outlook
The Middle East and Central Asia region is also facing slower growth, with a 2.4% projection for 2024. Disruptions in oil production and shipping have contributed to this slowdown. However, these challenges are expected to ease by 2025, when the region is forecast to grow by 3.9%. Saudi Arabia’s efforts to diversify its economy under Vision 2030 remain a central focus as the country continues to reduce its reliance on oil revenues.
Promising Growth in Non-Oil Sectors
While oil sector growth faces challenges, the Kingdom’s non-oil real gross domestic product (GDP) is expected to record a 5.5% increase over the next two years. A report from Moody’s credit rating agency highlights that increased government spending will drive this growth. According to the report, non-oil GDP growth will range between 5% and 5.5% from 2025 to 2027. This marks a significant improvement from the 4.6% growth recorded in 2022-2023 and a substantial leap from the 1.5% seen between 2017 and 2019.
S&P Global Forecasts Further Economic Expansion
According to S&P Global, Saudi Arabia’s overall GDP is set to grow by 1.4% in 2024, with an acceleration to 5.3% in 2025. The anticipated cuts in U.S. Federal Reserve rates are expected to benefit emerging markets like Saudi Arabia. The Kingdom is well-positioned to capitalize on its strong growth fundamentals and increasing capital inflows. S&P Global forecasts continued growth, with a 4% rise in 2026 before a slight decline to 3.6% in 2027.
Economists also expect inflation to remain controlled, averaging 1.8% in 2024 and 1.6% in 2025. Additionally, the unemployment rate is projected to decrease to 4.7% in 2024 and further to 4.4% by 2025, signaling a positive outlook for the labor market.
